Socioeconoic Determinants of Country Diversity in Turkey’s Foreign Trade

Abstract

Although the diversification of product and country in export is a dynamic mechanism that plays an active role in the whole economy, there is no clear foreign trade policy in Turkey for export diversification. However, in order to formulate such policies, it is important to know what triggers this process. In the study, normalized HHI, CR4, Absolute Theil and Entropy indices used to measure country diversity were calculated. Based on these indices, it has been determined that the diversity of exports in Turkey has increased on a country basis in the post-1980 period. Based on the literature reviews investigating the mechanisms that trigger the increase in country diversity, analyzes were made to determine the socioeconomic factors that determine the country diversity. According to the results of the long-term analysis, it has been observed that the country diversity in Turkey's exports is positively related to trade openness, terms of trade, macroeconomic instability, physical capital capacity, natural resource ownership and human capital, whereas it is negatively related to the increase in per capita income and distance to foreign markets.